Coal losing favour

The number of coal power plants in the country has grown substantially on the back of both investments through CPEC as well as the private sector. However, it seems that the global trajectory is in a different direction when it comes to investments in coal power plants.

The aim in this piece is to highlight only the difference in investment patterns and not deliberate about the merits or demerits of coal power plants for Pakistan. For the latter please go through “Coal romance not cool” published in this space on 22 January, 2019.But suffice it to say that coal power is here to stay especially in emerging economies where economic growth makes pollution concerns take the backseat.

According to the International Energy Agency (IEA), 2018 saw investment in coal based power fall by 3 percent to its lowest level since 2004. This was due in a large part to lower spending from China and India.

The global energy watchdog also highlighted that final investment decisions (FIDs) for new coal power plants fell by 30 percent to 22GW which is their lowest level in this century while plant retirements were seen at record levels on the other hand.

There has been a shift in FIDs to high efficiency power plants while out-dated technology such as inefficient subcritical plants are only 10 percent. Even though India is now the largest market for coal power plants displacing China, it is mostly looking to invest in supercritical technology but investment levels are now 80 percent lower than 2010. The Chinese shift from coal towards cleaner fuels has been on the cards for some time now and does not come as a surprise. Rising pollution levels and overcapacity have forced the government to act by putting new coal plants on a hold.

As the IEA points out, this has resulted in increased competition from Chinese EPC companies who are expanding business abroad which has resulted in better pricing and terms for customers in Southeast Asia and other regions. Indeed, the eagerness of China to include coal power plants in CPEC might also be explained by the shift in China’s own domestic coal policy. The IEA’s World Energy Investment 2019 also shows that costs and construction times for coal power plants have increased. This is both due to larger plant size and more complex designs to promote more efficiency and less pollution.

There is no doubt that increasing investment by Pakistan in coal is opposite to the global trend. However, coal still supplies almost one third of global energy and contributes to 38 percent in world electricity generation. Therefore coal is here to stay but the way forward is gradually transitioning towards cleaner sources while promoting more efficient coal power plants with advanced pollution control systems.